Starting with Citibank's announcement that marked the beginning of this bear run, further increases in the DJIA has been punctuated by reports of profits from the different banks, including Bank of America, Wells Fargo, JPMorgan, and now the latest: Merril Lynch, of all things.
Stepping back and looking at the broader picture, one has to seriously question this new profitability of banks in Q1 2009. First, most of the banks would be effectively bankrupt if not for the committment from the Fed, Treasury Department, and Congress to keep them afloat no matter how many toxic loans they underwrote. Second, we have an easing of mark-to-market accounting such that banks can freely overvalue their assets. We have bailout money pouring in hand over fist. Now TARP money banks are supposed to pay back. But bailout money that came in indirectly via AIG they have no obligation to repay (and AIG will collapse before it pays anything back), and now they have non-recourse government guarantees of toxic asset purchases throught the public-private investment program, which will amount to either a direct transfer of tax money to the banks obligation-free, or an expansion of the money supply by the $500B alotted through the program.
Banks are not profiting. Banks are bankrupt without the system bending over backward to keep them from sinking like a rock.